The Neodesha National Bank v. Russell
| Decision Date | 09 July 1921 |
| Docket Number | 23,311 |
| Citation | 109 Kan. 562,200 P. 281 |
| Court | Kansas Supreme Court |
| Parties | THE NEODESHA NATIONAL BANK, Appellant, v. E. D. RUSSELL et al. (THE CHICAGO BONDING & INSURANCE COMPANY, Appellee) |
Decided July, 1921.
Appeal from Wilson district court; SHELBY C. BROWN, judge.
Judgment affirmed.
SYLLABUS BY THE COURT.
PUBLIC BUILDING--Default of Contractor--Bank Loaning Money to Contractor to Pay for Labor and Materials Not Entitled to Subrogation to Rights of Lienholders. A bank loaned money to the contractor of a public building to pay and which was paid for labor and material used in the construction work, and took his notes drawing interest. The notes were not paid. The bank sued the bonding company, surety on the bond given by the contractor to the state conditioned that he should pay all indebtedness for labor or material furnished in the construction, and all claims which might be the basis of liens. Held, that by loaning the money to the contractor the bank acquired no interest in, and is not entitled to be subrogated to the rights of those whose claims, if not paid might have been the basis for liens.
A. H. Ward, of Neodesha, and J. T. Cooper, of Fredonia, for the appellant.
J. L. Stryker, of Fredonia, John T. Harding, D. A. Murphy, and Paul R. Stinson, all of Kansas City, Mo., for the appellee.
E. D. Russell was the contractor for the construction of a high-school building in the city of Neodesha. The Chicago Bonding & Insurance Company was surety on a bond given by him to the state of Kansas which contained the following condition:
"Now, therefore, if the said E. D. Russell shall promptly pay all indebtedness for labor or material furnished in the prosecution of said work; and shall pay all claims which might be the basis of liens, then the above obligation to be void, otherwise to be of full force and effect."
The Neodesha National Bank brought this action against the surety on the bond to recover $ 3,279.19, the face of three notes given by Russell to the bank and eight per cent interest thereon, making the aggregate amount of the bank's claim $ 3,440. The bank appeals from an order sustaining a demurrer to its petition.
The petition set out copies of three notes, one for $ 1,500, one for $ 1,200, one for $ 579.19, given to the bank by the contractor between June and September, 1919, each note bearing the following endorsement:
The petition alleged that the bank furnished Russell these sums "to be used in the payment of persons who furnished labor and material," that the money "was so used and paid for labor and material in the construction of said building," and that the bank by reason of these facts is entitled to be subrogated to all the rights and benefits of any persons whose claims have been the basis for liens which were satisfied or paid by the money so advanced.
Except for the memorandum that the money was to be used for the purpose of satisfying claims for labor and material used in the construction of the school building, the notes were on the ordinary form usually taken by banks in making loans to customers. The bank was a mere volunteer. It was under no obligation to become involved in the matter of the erection of the school building, except the usual desire of a bank to make profit by loaning its money on interest. In the opinion in the case of Deposit Co. v. City of Stafford, 93 Kan. 539, 144 P. 852, the authorities on this question were reviewed at length, and the court approved the doctrine of the...
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